2012 International Conference on Image, Vision and Computing (ICIVC 2012)
IPCSIT vol. 50 (2012) © (2012) IACSIT Press, Singapore
DOI: 10.7763/IPCSIT.2012.V50.31
The Influential Factors of Rural Residents’ Income Distribution Gap
and Its Adjustment Measures in China
Han Jian-yu a , + Sun Xiao-yu b, Zhi Da-lin b
a
b
School of Economics, Anhui University, Heifei, 230601, P.R.China
School of Economics，Northeast Normal University，Changchun, 130024，P.R.China
Abstract. In this article, we built two independent models: Gini coefficient model and rural residents’
income model, at the same time, we put forward a principle: “the economic development of a country tends
to choose measures or policy variable which can both narrow income distribution gap and increase rural
residents’ income”. Through model analysis, we found that promoting urbanization process, facilitating labor
force flow from contryside to city, increasing income from properties of rural residents are the double
excellence variables which can both increase economic efficiency and maintain scoial equity. Then, we can
select the policy and measures to adjust rural residents’ income gap.
Keywords: rural area; residents’ income distribution gap; Gini coefficient; policy and measures
1.
Introduction
From Alfred Marshall (1890) to representatives of neo-Cambrige school Kaldor (1956) and Ronbinson
(1956), from Kuznets (1956) to Alesina and Rodrik (1994) and Galor and Moav (2004), many famous
economists has chosen this topic as their life-long research interest, put forward many significant research
conclusions and left us numerous literature. But there are sill some problems for which important research
breakthrough are not made and there are large difference among opinions, such as the realtionship between
income distribution and economic growth, what is the impact of income distribution to economic growth,
and so on. Even for them it is unable to decide whethere the famous inverted U curve in income distribution
field really exists or not.
Integrating the need of Chinese political, economic and social development, some economists did the
relatively systematic research of the development tendency, causes and other problems concerning Chinese
rural residents’ income gap. Li Shi (1994, 1999, 2002) proposed in his serial books and some papers that
based on the reality that China is a developing country in transformation period, reasons of changes in
residents’ income gap should be investigated from three aspects: Economic development, economic reform
or institutional change, economic policy and its changes. While explaining income gap in the countryside, he
held that the differences of farmers’ job opportunities between non-agriculture and agriculture and
differences of labor reward rate between them are the main reason of generating income gap in the
countryside. For this reason he inferred that education, rural labor flow, income redistribution policy in the
countryside and others are also the important reasons to lead to extensive income gap. Zhang Ping (1998)
thought that the core reason of income inequality among regions was country deagriculturalization in rural
area, especially the unbalanced development of industrialization, so the core problem of solving regioanl
inequality is to promote coutry deagriculutralization, especially rural industry. Zhang Ping (2003), Zhu Ling
(1992), Wei Houkai (1996) and other scholoars also put the country deagricultralization in the importatn
+
Corresponding author. Tel.: + (13844800891); fax: + (0431-84536210).
E-mail address: (hanji403@yahoo.com.cn).
position. Wan Guanghua (1998) raised a different point of view based on the calculation of Gini coefficient
and decomposition of other factors, that is the rising trend of income gap among Chinese rural areas was
closely related to changes of rural economic structure and so whether at present or in the future it should not
be advocated to solve income gap among areas from the perspective of developing rural industry but we
should vigorously support the development of family-run operation in poverty-stricken area to achieve the
aim of effectively narrowing the income gap among areas. Integrating regression model and Shapley’s
framework (1999), Wan Guanghua and other scholars (2008) investigated the trend and causes of income
inequality of Chinese rural areas from 1985-2002 and they found that regional income inequality was the
main reason to lead to the increasingly extensive income gap, capital stock, human capital and country
industrialization contributed a lot to income inequality and population did some good to narraow income gap
but the influence was little. Wang Xiaolu and Fan Gang (2005) put forward that influencing factors of
income gap could be investigated from the aspects of ecnomic growth, income redistribution and social
security, public goods and infrastructure, systems and others. Other scholors like Chen Zongsheng (1994,
2000, 2002) and Zhou Yunbo (2008) also dealt with the issuse of rural residents’ income distribution gap in
their related books and raised some valuable methods and conclusions.
Based on the above consideration, reasearch topic of this paper is set as: main influecning factors and
adjustment of rural residents’ income gap. Meanwhile we consider to change the consistent research habit of
former research on influecning factors of income gap and not to use the decomposition method usually used
by many scholars. Instead we use model in modern metering method to do the research. Specifically
speaking, we try to build two independent models, one is Gini coefficient model which is used to discuss
which economic varialbes influence change of income gap; the other is income model which is used to sutdy
which variables make for increasing rural residents’ income. Then we set a principle, that is economic
development trend of a country tends to choose measures or policy variable which can both narrow income
distribution gap and increase rural residents’ income, these varialbes will be chosen from the reasearch
results of two equations and then according to policy meaning stood by these variables we can put forward
the correspondent policy and measures to narrow rural residents’ income distribution gap.
2.
Model Analysis
2.1.
Model design
In this paper we try to build two independent model equations including 18 different economic variables.
Of the above variables some are flow data, some are stock data, some are only ratio data. So it is not
reasonable to introduce them into the same equation. Considering above variables are all time series data,
from unit root tests we know that the above series are all nonstationary series and lags are not in full accord,
so building a whole model is not the optimal method. Generally speaking, change rate serie has zero lag, so
we get the grwoth rate serie of above variables through calculation and after inspection they are all stationary
serie. So we can use the modeling method of stationary time series to build the model. Explained variable of
Gini coefficient equation is GR and expalining variables are above 16 variables and per captia net income
(Y). Per captia net income series data are from China Rural Household Survey Yearbook of each year.
Explained variable of income model equation is per captia net income and expalining variables are above 16
variables. Data processing is the same with Gini equation. As described above, the ideal variable we look for
is the ru which is negative in Gini equation positive in income equation.
2.2.
Gini coefficient model analysis
First we bulid Gini coefficient model equation which includs all explaining variables. From the
inspection results we can see that there is relatively severe serial correlation in Gini equation because of large
number of explaining variables and their certain internal relationship and LM and Q inspection show the
existence of high order serial correlation. Combining autocorrelation and partial correlation coefficients, we
use of AR (4) model to modify equation’s serial correlation. After modification degree of equation’s serial
correlation largely decreases, but relatively big P value of some variables shows they have no remarkable
influence to change of Gini coefficient. After many trials, we knock out three variables pay, hyd and ti. This
shows that during 1978-2008 changes of labor remuneration’s share in GDP, installed capacity of village
hydropower station and per captia net income from transfers of rural residents did not have any remarkable
influence to change of Gini coefficient. Gini equation after knocking out three variables successfully pass all
kinds of inspections.
gr=-0.05-0.67y-0.17wi+0.1nae-0.48lm-1.52urb+0.85edu-0.06fex+1.54amp-0.63pro+0.34acp+0.5app0.06pi-1.52lb+0.76fix
(1)
NOTE: The first line in the bracket is t statistic, the second line is standard error. It is the same with
equtation (2).
First we do the preliminary analysis of ecnomic significance represented by model results. We divide 14
explaining varaibles having passed inspection into two groups, one group is positive variables in the equation,
the other group is the negative variables in the equation. We build Gini coefficient equation in order to look
for the variable which can narrow residents’ income gap. So we should pay great attention to variables with
negative coefficient in equation, arranged coefficients from smallest to largest, variables in negative group
include urb, lb, y, pro, lm, wi, pi and fex.
The coefficient of Urb is -1.524 which shows that when growth rate of level of urbanization has one
percentage point change, growth of rural residents’ income gap will have 1.524 percentage point change in
the negative direction, that is the promotion of urbanization level will be helpful to narrow rural residents’
income distribution gap. This shows that it is meaningful for Chinese government to positively push the
progress of urbanization from the perspective of narraowing rural income gap. The coefficient of Lb is 1.516 and this shows that Chinese rural household labor burden is helpful to narrow income gap which is not
consistent with our expectation. When choosing variables we expected that increasing labor burden may
make family with low income more difficult, and then it functioned to expand income gap. We think that
may be because in the carrying out of birth control policy in the countryside, rich families are cared much
and then there were more descendants while poor family give up reproduction due to high rasing cost. This
makes rich family’s wealth is diluted by many persons and then in a certain period income gap narrows. The
coefficient of per captia net income of rural resident is negative and this interests us. This means that
increasing of per captia net income helps to narrow income gap of residents. We think it may be because
most rural residents takp up agricultural activities and at present the background of expansion of income gap
of rural residents is the whole income level of rural residents is relatively low and only small part of them
who have opportunities to take up non-agricultural activities increase their income, but the majority residents
are still in the low level of income. If most rural residents are given the opportunity to increase income level,
the whole income level will correspondently increase and the income distribution gap will also narrow
correspondently. Or rather, rural residents’ income distribution gap is the general low level gap. Therefore
developing rural economy may be more urgent than narrowing income gap at the present stage. This is
different from the bacground of dealing with urban residents’ income gap.
The coefficient of Pro is negative which shows that increasing of per captia grain output helps to narrow
rural residents’ income distribution gap. We think that it is because most rural residents take agricultural
activities as the principal thing and this group is generally the group with low income in the village. So if
increasing of per captia grain output is helpful to increase their income, it is definitely of great significance to
narrow rural residents’ income gap. Wi coefficient is -0.168 and this means when growth rate of farmers’
income from wages has one percentage point change, growth rate of Gini coefficient will have 0.168
percentage point change in the negative direction. Development of rural enterprises do not have the function
described in the literature in the exapnsion of rural residents’ income distribution gap. Even increasing of
income from wages can do a liitle good to narrow income gap. We thinkg it may be because with the
development of new rural construction and rapid expansion of industrilization more and more rural residents
can get income from wages. So different from some scholars’ previous research results, increasing of income
from wages may become the important variable to narrow income gap because of expansion of its coverage.
Pi is negative and it shows that increasing of income from properties of rural residents will help to
narrow income distribution gap. Its policy implication is to increase residents’ income from properties level
and its share in total income, which is consistent with Chinese government’s proposal in these years. Fex is
negative and it shows that central government’s support of agriculture, farmer and village is helpful to
narrow income distribution gap, but ti is knocked out of equation because it is not outstanding. P value of fex
is as high as 0.125 and in a relatively high level we can think that expenditure on agriculture, farmer and
village helps to narrow income gap. The two show that in order to narrow narrow rural residents’ income gap
the present expenditure of suporting agrituclture and efforts of transterred payment are still needed to
continously intensified.
2.3.
Residents’ income model analysis
In the common research, the studies end with analyzing which economic variables will influence rural
residents’ income distribution gap because Gini coefficient model has answered this question perferably, that
is, which variables function to narrow income gap. But we think for the issue of rural residents’ income gap,
the study is still not enough if we stop here. Because there is a big development background in the expansion
of rural residents’ income gap, that is the backward of rural macroeconomic development. At the present
stage developing economy is a more urgent task and seen from the conclusion of Gini coefficient model
study increasing of per captia income is helpful to narrow residents’ income gap. So when investigating the
problem of adjusting income distribution gap, we think it also needs to take sustainable development of
social economy into consideration. At the beginning of the paper we put forward a point of view the
economic development of a country tends to choose measures or policy variable which can both narrow
income distribution gap and increase rural residents’ income. We can get the variables that can narrow
residents’ income distribution gap while the variables which helps to increase farmers’ income are needed to
choose from the following income model.
Using the same method and after the serial related modification and many trials, we successively knock
out the variables wi, nae, hyd, amp and pro. The remaining 11 variables all can successfully pass the
inspection and the whole model can also pass the inspection. We get the following residents’ income model
equation:
y=0.04+0.31lm+0.97urb-2.45edu-0.1fex+0.13ti+1.17pay+0.33acp+0.29app+0.01pi-0.38lb+0.4fix
(2)
Of remaining 11 explaining variables, there are 8 variables with positive sigh in the equation, that is to
say change of their growth rage can bring about the change of growth rate of net income in the same
direction. We choose some important variables to explain and because of other variables are in line with our
expectation there is no need to decribe the details.
The coefficient of pay is 1.17 and this means that when the growth rate of labor remuneration share
increase 1%, the growth rate of per captia net income of rural residents will also increase 1.17%, that is to
say, with raising of labor facotr of production in the first distribution of national wealth every year, rural
residents’ income will get a bigger increasing. This is in line with the rising appeal of reforming national
income distribution system and increasing worker’s salary level. This can also explain that most rural
residents make a living by selling labor and so the increasing of labor remuneration is easier to make their
income level have a big change.
3.
Further Analysis
In order to find the economic or policy variable which helps to both narrow residents’ income gap and
increasee rural residents’ per captia income, combing the above research results of two models we further
divided 16 variables into four types and the specific classification is shown in table 1.
Starting from our research hypothesis toward the problem and combining the standard of variable
classification, it is very easy to judge that A type of variables are the optimal variables in the all variables
available to choose in solving the problem of rural residents’ income distribution gap and those variables
include urb, lm, pi, even can include y. the economic meaning of this conclusion is that urbanization, labor
flow from village to city, increasing of rural residents’ income from properties all will realize the unity of
economic efficiency and social equity. They are helpful to both narrow income equality of rural residents and
increase common inome level of rural residents.
4.
Conclusion
The adjustment of internal income gap of rural residents is different from that of urban residents’ income
gap. The increasing of growth rate of per captia net income of rural residents can help to narrow the
increasingly expansion of rural residents’ income gap and in some sense it is the most reasonalbe poliy to
narrow rural residents’ income gap in the process of development. So in order to adjust rural residents’
income gap, the country needs to continuously intensify the efforts of supporting agriculture, farmer and
village, increase per captia income of farmers through all kinds of means, and realize the equal increasing of
most farmers’ wealth. Promoting the rapid development of rural economy is the material basis for adjusting
rural residents’ income gap.
Of all ecnomic or policy variables available to choose, urbanization may be the most feasible and most
effective meausre. While urbanization growth rate increase one percentage point, rural residents’ income gap
will be narrowed by 1.524 percentage point and at the same time it can also make net income of rural
residents increse by 0.967 percentage point. This kind of policy effect is just we wish for.
Labor flow from rural area to city is helpful to increase farmers’ income and it is also the important
policy and measure to narrow rural residents’ income gap.
Besides urbanization and free labor flow, urging the rapid increasing of income from properties of rural
residents is the only double excellent variable we can choose.
There are other important policy and measures to narrow rural residents’ income gap: promote
development of non-agriculture industries, increase income from wages for rural residents; intensify central
financing’s effforts to support agriculture and pay attention to regional balance and social equity; promote
agriculure by scientific and techonological advances, increase grain prodution, protect grain price and
farmers’ grain income; instensify efforts of supporting rural education, realize educational equity.
Table 1. Further classification of variables
Explaining variables
Influence to change of gr
Influence to change of y
Classification of evaluation
y
－
/
/
wi
－
Not remarkable
B
nae
+
Not remarkable
D
lm
－
+
A
urb
－
+
A
edu
+
－
D
fex
－
－
B
ti
Not remarkable
+
C
pay
Not remarkable
+
C
hyd
Not remarkable
Not remarkable
/
amp
+
Not remarkable
D
pro
－
Not remarkable
B
acp
+
+
C
app
+
+
C
pi
－
+
A
lb
－
－
B
fix
+
+
C
Note: + shows influence of the same direction, － shows influence of the reverse direction. A means it is
helpful to both narrow narrow rural residents’ income gap and increase rural residents’ income; B means it is
helpful to narrow rural residents’ income distribution gap but it will cause the decline of residents’ income
level or the influence is undefined; C means it is helpful to increasee rural residents’ income level but it will
cause expansion of income gap or the influence is undefined; D means it is unhelpful to increase rural
residents’ income and it also will expand income gap, or it has negative influence on one aspect while the
influence to the other is undefined.
5.
References
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